Samoa: Small Business Development Project [Loan 1785(SF)]

This report evaluates the performance of the project aimed at supporting the expansion of the micro and small enterprises sector with the objective of generating income and employment opportunities for Samoans on a sustainable basis.

Background

The project aimed to support the expansion of the micro and small enterprises sector with the objective of generating income and employment opportunities for Samoans on a sustainable basis. It focused on improving access of the micro and small enterprises to credit and business development support services, and on fostering an enabling business environment and more fluid land market.

This project performance evaluation report (i) assesses the project's relevance, effectiveness, and efficiency in achieving the intended outputs, and evaluates sustainability, institutional development, and socioeconomic impacts; (ii) assesses the performance of ADB, the executing agency, implementing agencies, and participating organizations; and (iii) identifies key issues and lessons for future ADB operations in the micro and small enterprises and microfinance sectors. This study will provide inputs to the higher level evaluations for Samoa and to the special evaluation study on ADB's Microfinance Development Strategy 2000.

Overall Assessment

The project is rated partly relevant, less effective, less efficient and less likely sustainable. Overall, the project is rated partly successful. The project did, to some extent, contribute to the generation of income and employment in the micro and small enterprises sector. The sector gained access to financing and were provided with business advisory services and training. New businesses were started, while existing businesses were expanded through the assistance of the project's credit components. However, the benefits were limited by deficiencies in design, delays and problems in implementation, and the institutional constraints of implementing and participating institutions.

Key Issues

Institutional capacity of the Small Business Enterprise Centre (SBEC). The institutional and financial capacity of the SBEC to sustain its guarantee scheme remains an issue. To a large extent, the SBEC is still dependent on donor and government support. The SBEC is continuing efforts to strengthen governance and management capacity and address weaknesses in the guarantee scheme. While these are expected to strengthen the capacity of the SBEC, its financial sustainability will likely continue to be a major challenge.

Legal issues regarding the validity of the guarantee scheme. The issue of whether the SBEC should issue guarantees in its own right or as an agent of the government needs to be resolved. This legal issue was not identified in the early stages of project implementation and was overlooked at appraisal. Resolving the issue would reduce the risk of financial insolvency and undue liability for the SBEC board. It would also clarify the legality of the Ministry of Finance delegating the issue of guarantees to a nongovernment entity such as the SBEC. Solutions to these legal issues are currently being reviewed by the SBEC, and discussions with the Ministry of Finance are continuing.

Economic use of customary land and the chattel registry. Reforming land rights to promote economic use of customary land remains major challenges confronting the government. In addition, the lack of a comprehensive registry of chattels and properties also constrains bank lending to the sector. Resolution of these issues would strengthen the collateral framework for the credit market, and consequently support the sectors' greater access to business financing.

Lessons

Project design based on sound and thorough assessments of institutional constraints and market conditions would have ensured smoother implementation and an appropriate focus on an enabling environment for the financing and growth of micro and small enterprises;

Early identification of the constraints to implementation and the development of clear strategies to address these constrains would have made implementation more effective and efficient;

Support for capacity building should be geared towards promoting the long-term sustainability of institutions; and

Enterprise finance projects need to have a clear exit strategy at completion.

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